The Rise and Fall of Eastman Kodak — Nightowltrader.Blogspot.C

The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c... http://www.readability.com/articles/h97s6heh?legacy_bookmarklet=1 nightowltrader.blogspot.com The Rise and Fall of Eastman Kodak by MICHELE • SEPT. 25, 2011 Bumbling the future: a tale of two companies Disclaimer: I have no financial interest of any kind in Eastman Kodak, either long or short, and no plans to take any position in the company - ever. I have never held any shares of EK so what follows isn't sour grapes. I am not an insider and have no inside information. Back in 1988 Douglas K. Smith wrote a book called Fumbling the Future: How Xerox Invented, then ignored the First Personal Computer. He went into fascinating and gory detail of the fumbling and bumbling that went on in Xerox management that led to one disastrous blunder after another. What does this have to do with Kodak? The parallels are striking. Both companies are based in Rochester, NY (Xerox subsequently moved their headquarters to Connecticut but maintains its base of operations in Rochester). Both companies were started by men of genius with a unique product and boundless drive. Both companies grew like mad on the success of their products and innovation. And both companies subsequently lost their way. Xerox invented the world's first viable personal computer and Kodak invented the first digital camera. Both companies failed to realize the significance of that. And just as the PC demolished Xerox's highly profitable core business of photocopiers, the digital camera killed Kodak's main profit center of photographic film. Both companies went through a series of strategic blunders. I'll leave Xerox now with the suggestion that you read Smith's book and concentrate on Kodak. A timeline of shame World's 1st digital camera In 1975, Kodak invented the digital camera. Then ignored it - for more than 20 years. Little did anyone suspect at the time that this odd-looking ungainly box would eventually be the company's undoing. 1 of 15 1/16/12 11:35 AM The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c... http://www.readability.com/articles/h97s6heh?legacy_bookmarklet=1 Kodak instant film camera In 1976, Kodak decided to enter the field of instant photography, essentially the sole domain of rival and powerhouse Polaroid. Several years later, Polaroid sued Kodak in a now famous case and won a whopping $1 billion settlement, back in the days when $1B was a lot of money. Kodak was obligated to stop making that product and never returned. The irony is that Kodak instant prints were far superior to anything Polaroid had. The further irony is that Polaroid then completely squandered their windfall and ended up going bankrupt in 2008. Kodak Ektaprint 150 copier Also in 1976, Kodak decided for some reason it would be a good idea to start making copiers. This venture managed to last until 1997. In yet another irony, by the late 80's Kodak's copiers were better than those of cross-town rival Xerox. The opportunity was there for a while, and they blew it. In 1982, Kodak employment hit 60,000 in Rochester alone. It is Kodak's heyday. It's the largest employer by far in the Rochester region. Local stores run full page ads targeting Kodak employees to spend their bonuses with them. They're particularly popular with car dealers. Times are good. 2 of 15 1/16/12 11:35 AM The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c... http://www.readability.com/articles/h97s6heh?legacy_bookmarklet=1 Kodak 4000 disc camera and film But already there are signs of trouble on the horizon, signs that the film business is becoming mature. In 1982, Kodak introduced the disc film system. If there's a more inefficient way of arranging negatives on a carrier, I can't think of it. The only advantage of this system was that it allowed the camera to be thinner and this had an undeniable wow factor. But the tiny negatives had an undeniable ugh factor. Disc images were so bad that even ordinary snapshot consumers, the kind of people who were content to watch color TV with green and purple faces, complained. The format nevertheless managed to survive until 1998. I doubt many people were still using it by then. The camera itself was axed in 1989. Kodak 8 mm video cassette deck In 1984, Kodak decided to enter the video recording arena with an 8 mm. video cassette unit in an increasingly crowded market already full of VHS and then Beta machines. Three years later, they pulled the plug on this product after some serious marketing miscues. 1987: Kodak invents the OLED (organic LED) - and proceeds to ignore that too for 20 years. 1990: In a gorgeous coffee table book titled The Story of Kodak, author Douglas Collins proclaims, "film remains and will continue to remain the preferred medium for picture taking." New hires in the Kodak Research Labs get a free copy of this book as a welcome gift. Also in 1990, Kay Whitmore replaces Colby Chandler as CEO. Short answer: no 1993: Kodak hires ex-Motorola head honcho George Fisher as president and CEO. This is probably the one move more than any other that doomed Kodak. He lasted until 2000. By then, the damage was done. 3 of 15 1/16/12 11:35 AM The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c... http://www.readability.com/articles/h97s6heh?legacy_bookmarklet=1 George, you're getting an entire chapter all to yourself in my forthcoming book, The Decline and Fall of Eastman Kodak. 1994: Kodak spins off its chemical division into a new company called Eastman Chemical. This one move was probably the worst decision Kodak ever made. Kodak's fate was sealed from this moment on. Eastman Chemical opened in 1994 at 21.12. It most recently closed at 38.19. Kodak opened 1994 at 44.19 and now trades just above one dollar. Picture Kiosk Kodak also sold its holdings in drug maker Sterling Winthrop to Sanofi Aventis. And Kodak also sold its rights to Bayer aspirin and the Bayer name and trademarks to SmithKline Beehcman for $2.9 billion. 1994 was a big year for Kodak. They also sold their cllinical diagnotics unit to Johnson & Johnson for yet another billion dollars. Where did all this cash go? Read on. Also in 1994, Kodak came out with the Picture Kiosk, a strange walk-up device that someone thought was a good idea. People were going to stand there in the store and edit their photos digitally, then print them. Our local grocery store had one of these. I never saw anyone actually using it. Finally one day, it looked like this. The sign reads "Out of Order". While I got the impression that this kind of sumed up the whole project, I have been informed that this particular venture was actually a success.. You'd never know it from this particular machine though. It is no longer there, having been unceremoniously removed years ago. Kodak DC-20 In 1996, Kodak decided to get into the digital camera business (finally) with their first offering, the DC-20. A horrible cheaply made product that took absolutely awful pictures, even by 1996 standards, at $350 back then, the DC-20 was not a hit. Digital was always the poor stepchild at Kodak - mostly because it wasn't film. By the time they finally got serious, the market had moved on again. 4 of 15 1/16/12 11:35 AM The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c... http://www.readability.com/articles/h97s6heh?legacy_bookmarklet=1 Today, digital cameras are losing ground to the ubiquitous camera-equipped cell phones. One has to wonder what they were thinking, replacing a high profit low-competition item like film with a low-profit product like digital in an industry with cut-throat competition. Kodak Advantix APS film Also in 1996, Kodak rolled out APS, the Advanced Photo System, with a line of Advantix cameras and film. Introduced with great fanfare, APS was sort of a last ditch effort to extend the life of film and illustrates the deep commitment of Kodak to this product. The juxtaposition of Advantix and the DC-20 in the same year is telling. Technically well-executed, feature-laden, and visually appealing, APS nonetheless was unable to stem the digital tsunami. Advantix film production ceased in 2011. EK monthly, 1997-2002 Perhaps coincidentally, EK hit its all-time high stock price of $94.75 early in 1997. With Kodak closing last week at $2.38 that's sort of hard to remember. Back then Kodak was also a member of the Dow, the bluest of blue chips. Also in 1997, Kodak finally threw in the towel on copiers, selling its entire Office Imaging business to Danka Business Systems. In 1998, Kodak opened a plant in Ireland to mass produce writeable CD's, just before CD's became a commodity item. The world was awash with CD's (remember getting one in the mail from AOL once a week?) Then hard disk drive storage capacities exploded, first through multimegabytes, then gigabytes, and now terabytes, obviating the need for CD's entirely. In 2001 Kodak exited the CD production business. Also in 1998, Kodak shut down their disc film line. In 1999, Kodak continues cutting its way to success by selling its digital printer and copier division to Heidelberger Druckmaschinen AG. 5 of 15 1/16/12 11:35 AM The Rise and Fall of Eastman Kodak — nightowltrader.blogspot.c..

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